CEO Will Leave a Struggling Mondelez -- WSJ

By Annie Gasparro Features Dow Jones Newswires

Departure comes after snack giant strove to improve sales amid upheaval in industry

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This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 3, 2017).

Irene Rosenfeld is stepping down after 11 years as chief executive of snack giant Mondelez International Inc., having fought to improve sales and profitability amid an upheaval in the packaged-food business.

Investors pushed Ms. Rosenfeld for years to draw more profit from a broad portfolio of traditional snacks such as Oreos and Ritz crackers. Mondelez faltered in volatile emerging markets and struggled to address consumer demands for fresher, healthier food. Some of America's best-known food brands are losing shelf space to new, trendier products, sending them on a race to buy or create new products to keep up.

"In hindsight, I think perhaps we could have gone after the costs a little faster," Ms. Rosenfeld said on Wednesday. "My regret is that we haven't fully realized the potential on the top line."

Now that work will fall to an outsider, Dirk Van de Put, head of Canada's closely held McCain Foods Ltd., who will take over for Ms. Rosenfeld in November. Ms. Rosenfeld, 64 years old, will continue as chairman of the Mondelez board until she retires in March.

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In an interview, Ms. Rosenfeld said she told Mondelez board members of her plans to retire about two years ago. "I didn't have a precise timeline, but I said that after about a decade is a good time to think about a transition," she said.

Mondelez board members have been searching for Ms. Rosenfeld's successor since at least the spring. Ms. Rosenfeld wanted to find the right person before she agreed to leave.

"Irene truly transformed this company in her 11 years," said Lois Juliber, an independent Mondelez director since 2007, in a text message.

Ms. Rosenfeld's retirement will shrink an already small pool of female chief executives of the biggest U.S. businesses. As of Wednesday, women held 27 of the CEO spots at S&P 500 companies, according to research group Catalyst, 5.4% of the total. Catalyst's tally reflects companies in that index as of January 2017.

Mr. Van de Put, 57, has led McCain Foods for six years, increasing revenue and profitability even as the company's core product, french fries, fell out of favor with many health-conscious consumers. To address that shift, McCain introduced sweet-potato fries and low-fat varieties.

He worked previously at Danone SA, Coca-Cola Co. and Mars Inc. Ms. Rosenfeld said he is ready for the jump from a $7.3 billion maker of potato products to a $66 billion conglomerate whose disparate brands stretch from Triscuits to Trident gum.

"There's a real value in a fresh pair of eyes," Ms. Rosenfeld said, citing Mr. Van de Put's experience at food companies on three continents. She said the board considered internal candidates to succeed her as well, but declined to name them.

Ms. Rosenfeld led Mondelez through several transformations. In 2010, she orchestrated the acquisition of British chocolate company Cadbury PLC for $19 billion. Two years later, she separated Kraft, Oscar Mayer and other brands and renamed the remaining company Mondelez.

But the more focused company struggled to grow its stable of legacy brands, particularly in the face of economic turmoil in key emerging markets including China and Venezuela. "The single biggest factor was the change in the macro environment," Ms. Rosenfeld said.

Activist investors Nelson Peltz and William Ackman took big stakes in the company in 2013 and 2015, respectively, and urged Mondelez to improve profit. Ms. Rosenfeld responded in part by cutting costs, closing or selling more than 40 factories. That helped boost the company's adjusted operating margin to 15.3% in 2016 from 12% in 2013.

Some investors say those changes fell short. "Anyone can close plants and reduce head count. Where was the innovation?" asked Dennis O'Connor, a longtime Mondelez investor in North Carolina who owns a few thousand shares.

Mondelez shares have risen 20% over the past three years, short of a 29% gain for the broad S&P 500 stock index.

Its shares closed roughly flat on Wednesday. Mr. Peltz, a Mondelez board member, welcomed Mr. Van de Put's hiring on Wednesday and congratulated Ms. Rosenfeld on her efforts to improve profitability.

Aaron Brunette, an analyst at Santa Barbara Asset Management, a Mondelez shareholder, said he thinks Ms. Rosenfeld has made progress in recent years, setting the company up for strong revenue growth once external challenges subside.

Slowing sales have sparked consolidation and executive changes in the industry. Kraft in 2015 merged with H.J. Heinz Co. to form Kraft Heinz Co., which made a bid for Unilever PLC earlier this year. General Mills Inc., Hershey Co. and others have named new CEOs this year.

Mondelez sought to buy Hershey last year in a deal worth more than $25 billion. Ms. Rosenfeld walked away after Hershey rebuffed its advances.

Kraft Foods named a new chief executive a few months before its deal with Heinz, leading some analysts to question whether Ms. Rosenfeld's departure makes Mondelez a more likely acquisition target. By staying on the board, Ms. Rosenfeld could "remain a key player in the brokering of any deal before she steps down," said Bernstein analyst Alexia Howard.

In its second quarter, Mondelez delivered revenue of $5.9 billion and earnings of 48 cents a share. Analysts polled by Thomson Reuters expected 45 cents. Comparable sales in the quarter fell 2.7%, hurt by the impacts of a cyberattack. The company still expects 1% growth annually by that measure this year, with the help of new better-for-you food brands like Vea.

Joann S. Lublin contributed to this article.

Write to Annie Gasparro at annie.gasparro@wsj.com

(END) Dow Jones Newswires

August 03, 2017 02:47 ET (06:47 GMT)